The United States House of Representatives was abuzz with talk about crypto on April 27, as both the Financial Services Committee and the Agriculture Committee held hearings with nearly identical titles and covered nearly the same ground with many similar conclusions.
The Financial Services Committee in its hearing “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure” heard from Davis Polk partner Zachary Zweihorn, who argued that “securities market structure laws and regulations do not align with digital asset securities.” He said:
“We’ve all heard the siren’s call to ‘come in and register.’ It sounds enticingly attractive. But this is an oversimplification that conflates registration, which may theoretically be possible, with compliance, which is not.”
American University law professor Hilary Allen, a noted opponent of cryptocurrency, disagreed with Zweihorn. “This is a misdirection,” she said of the industry’s claim of incompatibility with current regulations. “It is entirely possible for a blockchain-based technology business to comply with existing investor protection and financial stability regulation.”
Gattaca Horizons founder and CEO Daniel Gorfine was a voice of moderation in the discussion. He said:
“Some of the problems we have observed in the crypto space over the past year are a result of too much focus on novel digital assets rather than real-world applications that yield productive gains and improve lives.”
Similar sentiment was echoed in the Agriculture Committee’s hearing “The Future of Digital Assets: Identifying the Regulatory Gaps in Spot Market Regulation.”
Looking forward to testifying in the House Financial Services Committee today at 2 ET! Livestream: https://t.co/fWH7etJQH6
— Marta Belcher (@MartaBelcher) April 27, 2023
Katten Muchin Rosenman partner Daniel Davis said much of the spot market in digital assets is outside the jurisdiction of both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Digital assets that are not securities or a leveraged retail commodities product, for example, are not regulated, although the CFTC has “backward looking authority” to prosecute fraud.
Of the top 15 digital assets traded, two have been identified by the SEC as securities, and seven have been identified by the CFTC as commodities, leaving considerable confusion even in the most actively traded…
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